Amid bittersweet goodbyes and heartfelt tributes to outgoing legislators, a different kind of drama unfolded under the dome of the Arkansas Capitol: the fate of Rule 128. This proposed regulation, aimed at addressing pharmacy reimbursement issues, sparked intense debate as lawmakers grappled with questions of market fairness, government intervention, and consumer costs. What began as a procedural vote on a pharmacy-related rule quickly turned into a microcosm of broader healthcare policy challenges.
The December 19 meeting of the ALC Administrative Rules Subcommittee brought forth a heated debate over Rule 128. While Booth Rand, General Counsel for AID, provided a legal and administrative foundation for the rule, the discussion largely revolved around the perspectives of legislators who questioned both the necessity and implementation of the proposed regulation.
Senator Jonathan Dismang raised pointed questions about why existing authority under the PBM Licensure Act had not been enforced more rigorously, stating, “If you’ve had the tools since 2020 to study and enforce these practices, why haven’t you acted?” Senator Ricky Hill echoed this concern, emphasizing that disparities between affiliate and non-affiliate pharmacies could be addressed without implementing a new dispensing fee.
Much of the debate focused on ensuring adequacy and fairness in the pharmacy network. During the December 19 meeting of the ALC Administrative Rules Subcommittee, Booth Rand, General Counsel for AID, explained the origins and intent of Rule 128.
“The complaints by the pharmacies was that if they are only going to be able to get their inventory cost or their acquisition cost, they complained about the sustainability of being able to stay in business without some dispensing cost added to the reimbursement,” Rand said.
The proposed rule would require health plans and Pharmacy Benefit Managers (PBMs) to submit data detailing pharmacy reimbursement practices. Based on this data, the Insurance Commissioner could impose a dispensing fee of up to $10.50, with smaller or no fees possible depending on the findings. Legislators clarified that the proposed dispensing fee under Rule 128 would not impact Medicaid or Tricare. Instead, it would apply only to self-funded health plans regulated by the state.
One of the most contentious issues highlighted during the debate was the disparity in reimbursement rates between affiliate and non-affiliate pharmacies. Affiliate pharmacies, often owned by PBMs themselves, frequently receive higher reimbursement rates than independent pharmacies. This disparity has long been a source of frustration for independent pharmacists, who argue that it creates an uneven playing field and undermines fair competition.
Legislators such as Senator Jonathan Dismang and Senator Ricky Hill pointed out that these disparities could be addressed under existing powers granted to the Insurance Department through the PBM Licensure Act. However, enforcement of these provisions has been lacking.
Proponents of the rule highlighted its necessity for preserving access to healthcare in underserved areas by protecting local pharmacies.
Senator Linda Chesterfield was a staunch advocate for the rule. She argued, “If you lose these pharmacies, you’re not just losing a business—you’re losing access to healthcare in underserved areas.”
Chesterfield further emphasized the administrative burdens on pharmacies, explaining that their work goes far beyond simply dispensing medications. “We’re not here to make pharmacies rich, but we are here to ensure they survive,” she said.
Senator Justin Boyd highlighted the importance of Rule 128 in addressing transparency and ensuring fair reimbursement. He argued, “Rule 128 isn’t about creating a new tax—it’s about transparency and ensuring fairness in pharmacy reimbursement models.”
Critics of the rule raised concerns about increased consumer costs and government overreach.
Senator Missy Irvin labeled the dispensing fee a “hidden tax” and warned of its implications for consumers.
“We cannot solve a PBM problem by taxing Arkansans at the pharmacy counter,” Irvin said. “This rule doesn’t just threaten free-market principles; it passes costs onto the people we’re trying to protect.”
Senator Jonathan Dismang criticized AID for relying on outdated data and argued that the rule failed to address core issues like PBM practices.
“So what I would say in all of this...I believe you have the authority and the ability to gather all of this information,” Dismang said. “But rushing into this rule without current data doesn’t solve the fundamental problem.”
Dismang and others contended that AID already possesses sufficient statutory authority to address pharmacy reimbursement issues without introducing Rule 128. He specifically pointed to enforcement gaps, questioning why AID had not conducted more recent investigations into PBM practices, such as spread pricing and affiliate favoritism. He noted that only a small number of complaints about NADAC payments had been fully processed, raising doubts about AID’s capacity to implement new rules effectively.
The concerns about affiliate pharmacies and reimbursement disparities also dominated discussions during the December 18 Insurance and Commerce Committee meeting. Senator Ricky Hill, who chaired the session, expressed skepticism about Rule 128’s ability to address these core issues. He and others pressed AID representatives on why existing powers under the PBM Licensure Act had not been leveraged to resolve these problems.
At the December 19 Administrative Rules Subcommittee meeting, the rule was debated extensively and not recommended for approval. The subcommittee expressed concerns about the rule’s implications and whether it adequately addressed core issues.
The following day, during the full ALC meeting, Senator Mark Johnson successfully moved to separate Rule 128 from other items for an individual vote.
Representative Jeff Wardlaw, chairing the session, emphasized procedural clarity during the debate. After thorough discussion, Rule 128 was adopted by the council.
Looking ahead, the debate over Rule 128 is likely far from over. With the upcoming legislative session set to begin in just a few weeks, lawmakers are expected to introduce new legislation aimed at addressing PBM practices, pharmacy reimbursement, and related healthcare policy issues. Notably, Senator Ricky Hill, a vocal opponent of Rule 128, will chair the Senate Insurance and Commerce Committee, which will play a key role in shaping related legislation. The committee includes other opponents, such as Senators Jonathan Dismang, Jimmy Hickey, and Missy Irvin, alongside supporters like Senators Justin Boyd and Mark Johnson. Their positions and influence will likely set the tone for the coming debates.
As health plans submit data in 2025, AID will evaluate whether the dispensing fee achieves its goals or requires further adjustments. Meanwhile, the debate over free-market principles versus government intervention is expected to continue shaping Arkansas’ healthcare policy.
Representative Jeff Wardlaw [Chairing full ALC meeting] So, members, here's the deal. We've done this two times already this week. I'm going to recognize two more members. I'm pretty sure they have motions. I'm not going to decide anything in this thing. Y'all are. So I'm not going to not take any motions. So, members, I guess put your seatbelt on and get ready. Here we go.
Senator Linda Chesterfield We're losing pharmacies across this state. And we're losing pharmacies across this state simply because they are not reimbursed at a rate that will allow them to thrive. As one of those individuals who takes advantage of local pharmacy that's not big pharma, that is not a chain pharmacy, that does not send stuff through the mail, I believe that we have got to save these pharmacies.
Senator Jonathan Dismang I can see where this is going today, and I understand that-- but false hope is a very dangerous thing. And we are giving pharmacists across this state false hope that a department that has not been able to do its job in the last five years in regards to many issues related to PBMs are somehow going to be able to better create contracts between PBMs and pharmacists. The Insurance Department has the ability and has had the ability to gather the information needed to get a better understanding of what is fair and reasonable and then also what is an adequate network. They have chosen not to do that. But what I guarantee you we have done, is we are intruding on contracts between businesses and individuals or companies. And we are we are saying as the government, we will know better. The last time the Insurance Department has taken on that task to look at how payments were being made to affiliated companies was in 2020, five years ago, a half a decade ago. And we're expecting that we're going to give them unknown power to intervene in contracts and they're somehow going to be able to satisfy that task. And they are giving you false hope with an outcome that will not realize what you're actually after, which is to hold PBMs accountable.
Senator Jim Dotson Looking through this, I have read this rule backwards and forwards and even asked the Insurance Department yesterday basically what the fee is going to be, what the fee is going to be on each prescription that is put out in the state. And the answer is they don't know. It can range from $0 to $10.50. If I'm understanding correctly, that's the maximum amount. So for each prescription, it could be up to $10.50, but they'll make that determination year over year. And of course, we don't have a metric on how that determination will be made. But this will have real impact on each of our constituents every time they go to the pharmacy every month. It's literally government picking winners and losers. And I don't see how that's fair or reasonable to anybody. And it doesn't solve the problem of access to pharmacies across the state.
Senator Missy Irvin This is a pharmacy tax that will be paid at the point of sale through an increased co-payment on every single prescription. So if you get five prescriptions, that's going to be $50 just for a dispensing fee on every single one of those medications. That is a tax that is going to be given and dictated to, not by legislative authority, but by one person's opinion on metrics and data that we still do not have.
Senator Mark Johnson Article 2, Section 19 of the Constitution says, and this is a quote, 'Perpetuities and monopolies are contrary to the genius of a republic and shall not be allowed.' And that is exactly what we're dealing with here. We're once again fighting an antitrust battle against a very strong, powerful, wealthy, vertically integrated monopoly. But this rule simply extends the emergency power that the commissioner has to protect the market until we can come back-- and I make no bones about it-- this issue will be revisited. You've already heard from three members of the Insurance and Commerce Committee, the incoming Insurance and Commerce Committee.
Senator Justin Boyd I'm disappointed with some of the misinformation that is being said by my colleagues there. To quote, This affects every single prescription. This, in fact, does not affect every single prescription. There are a lot it doesn't. For instance, if you have a $4 prescription somewhere, you go in and you pay cash for this, there's nothing in this rule that affects that transaction. There's nothing in this rule that says the cash market cannot work. This is only the market that is primarily self-insured plans. It does not affect Medicare. So if you're on Medicare, this rule will in no way impact you. Now, let me tell you about a tax. By not passing this and continuing the status quo, what will be a tax is the continued rise in prescription drug cost. We have the highest level of prescription drug costs in the entire world. And a big part of that is the PBMs, the pharmacy benefit managers, who also either they own an insurance company, the big ones, or the insurance company owns them, so they're one in the same. I fully believe that this rule is a step in that direction to actually help control costs, not add a suppose a tax on Arkansans.
